Natalie Parker talks with applicants during a job fair at the Hospitality Institute.

This column contains a correction.

Since the end of the Great Recession, the economy has added 9.4 million jobs, and the unemployment rate has fallen from 10 percent to 5.6 percent. The labor market is much healthier today than at any point since the Great Recession, but beneath the top-line numbers, it still has a long way to go before it returns to historically healthy conditions. Last year, the Federal Reserve tacitly acknowledged the widening gap between the reality of the labor market and its most well-known measures by switching from a quantitative unemployment threshold to more comprehensive “measures of the labor market” in its forward guidance. The question, then, is this: What is happening with these broader labor-market indicators the Federal Reserve is looking at? Here’s a quick tour of the most important jobs data you should see in the headlines but rarely do.

Who’s working, who isn’t, and why

When the economy is doing well, more people typically enter the labor market because there are more jobs available. So we should expect the labor-force participation rate to be increasing in the aftermath of the recession. It hasn’t been. Instead, it’s declined steadily since the end of the recession and is as low today as it was in the late 1970s, when women were entering the workforce for the first time. Even with the positive developments we saw in 2014, labor-force participation is still stuck where it was at the end of 2013.

One explanation for the decline in labor-force participation is that as Baby Boomers age, more Americans are in retirement. The fact that we see the same post-recession trend among 25- to 54-year-olds, people in their prime working years, makes this theory hard to support.

Underemployed and uncounted job hunters

Policymakers and pundits have taken far too much comfort in the decline in the headline unemployment rate. The extent to which unemployment has dropped depends on how it’s measured, especially in this recovery. The typical measure, called U-3 by economists, is pretty restrictive: It counts the percentage of people who are actively looking for work but cannot find it. There are other, broader measures we can look at. Perhaps the most complete picture, called U-6, includes marginally attached workers—those who have looked for work recently but are not looking currently—and those working part time who would prefer full-time work. U-6 is always higher than U-3, but it has gotten a lot higher since the recession, and the gap has been essentially unchanged since January.

Long-term unemployment

Another reason that the traditional unemployment rate is less informative about the overall health of the labor market is the fact that today the number of long-term unemployed, while down sharply from its post-recession peak, is still almost 50 percent higher than its highest prerecession level on record. There are still 2.8 million Americans who have been unemployed for half a year or longer and are still actively searching for work. Thirty percent of all unemployed fall into this long-term unemployed category. The average length of time someone has spent unemployed is about eight months, almost double what it was before the recession.

Weak job growth

As for job growth, during the economic expansion of the 1990s, the economy added at least 250,000 jobs per month 47 times. During the current expansion, which has now lasted roughly half as long, we have seen only six months of job growth greater than 250,000, which includes abnormal hiring involved with conducting the decennial census. Meanwhile, at the average rate of job growth over the past three years, The Hamilton Project estimates that we will not reach our former level of employment, when factoring in new labor-force entrants, until sometime after September 2016.*

Insecure labor force

Another approach is to think about what data we would expect to see if the labor market were healthy and look for that data—or the absence of that data. In a healthy labor market, there is a tremendous amount of churn, with roughly 2 million workers flowing in and out of jobs each month. This is crucial for the U.S. economy, as it represents workers and firms finding better, more productive matches. During times of economic uncertainty, however, people are hesitant to leave their jobs. We cannot directly measure something such as overall job fit, but we can make reasonable inferences about these things by looking at the rate at which workers quit their jobs. As you might expect from the rest of the data we have explored, quit rates are conspicuously low, yet another indicator of a still sluggish labor market.

Declining real wages mean there is still slack in labor markets

One other way of analyzing the health of the labor market is to treat it like any other market, where supply and demand determine prices—or wages, in this case. We want a labor market that is improving and adding more jobs. If the market is improving, we should see more jobs and upward pressure on the cost of labor. Is there evidence of rising real compensation? Hardly. The Employment Cost Index, a more complete measure than basic hourly wage growth, shows falling real wages since the recession. Negative real wage growth means the amount of slack in the market is still considerable.

Conclusion

We have been living with the effects of the Great Recession for nearly six years, and the unemployment rate has never told a story of the labor market as incomplete as it does today. When policymakers talk about the need to let off the gas pedal and start tightening policy, which Congress has been proudly doing since 2010, they are consciously or unconsciously taking a myopic view of the labor market’s recovery and causing permanent damage to the economy.

Complacency among policymakers has become increasingly entrenched as the recovery lumbers on. Recent data do show that we are headed in the right direction but not nearly fast enough, and we certainly have not arrived at our destination. People usually assume that restraint and caution is safer, but there are situations in which this instinct makes one much less safe. During recovery from a deep recession, speed is safety. If we do not aggressively reintroduce the workers who have left the labor force and reduce the number of long-term unemployed, not only would it be an injustice to them, but it would also be a huge, permanent shrinking of the American economy as a whole.

Correction, February 6, 2015: This column and corresponding note have been corrected to reflect an updated methodology for estimating when we will reach our former level of employment. The correct estimate is September 2016.

Michael Madowitz is an Economist at the Center for American Progress. Danielle Corley is a Special Assistant with the Economic Policy team at the Center.

Despite the gradual return of the unemployment rate to prerecession levels, some workers still have not benefited from the economic recovery. Even in healthy economies, high rates of joblessness remain a persistent problem for individuals who face severe labor-market disadvantages or barriers to employment. These individuals include people with criminal records, people with disabilities, individuals with limited education and minimal work experience, and opportunity youth—young people ages 16 to 24 who are not in school or working.These workers are often the last to be hired—even in good times—and the first to be laid off in tough times. Other groups—such as the long-term unemployed and older workers— suffered disproportionately during the recession and continue to experience elevated unemployment rates even as the economy recovers and adds jobs.

These individuals are denied the economic security and opportunity that comes with employment. Furthermore, eligibility for government safety net programs is increasingly tied to work, meaning that those who are excluded from the labor market often have limited access to resources and supports that would help them and their families make ends meet and advance in the labor market. While some resources are available to specific groups through programs such as unemployment insurance, or UI, and Temporary Assistance for Needy Families, or TANF, no dedicated funding is available to states that wish to create employment opportunities for all who seek work.

Targeted policy action is required to help these disadvantaged and detached groups regain and sustain employment. This report discusses one promising solution: a national subsidized jobs program, which would provide states with flexible options to create job opportunities for workers who have not succeeded in finding employment through the usual channels. A national subsidized jobs program would create targeted work opportunities and is an idea that could attract bipartisan support.

For struggling workers and their families, subsidized jobs would alleviate hardship in the short term by generating immediate work-based income, while also providing valuable work experience to improve workers’ employment credentials and help them escape poverty. A national subsidized jobs program would also serve as a buffer for our nation’s economy—softening the impact of future downturns by counteracting increases in unemployment, enabling businesses to preserve and expand their workforces, and boosting demand in local communities. This program could supplement the UI system and the Supplemental Nutrition Assistance Program, or SNAP, formerly known as food stamps, as an automatic economic stabilizer.

Recent experience with subsidized jobs programs—notably, those implemented by states in 2009 and 2010 using stimulus funds from the American Recovery and Reinvestment Act—shows that subsidized jobs programs work to achieve these goals. A subsidized jobs program cannot replace the need for broader changes to labor policy such as a higher minimum wage and widespread job creation, but it would offer a powerful tool to ensure that all who seek employment have the opportunity to participate in the labor market.

A successful national subsidized jobs program would connect participants with suitable employers, providing participants with a work-based source of earned income and valuable labor-market experience while preparing them to eventually transition into unsubsidized employment. Under a competitive grant structure, states could help workers get a foothold in the labor market and partner with local employers. Specifically, a national subsidized jobs program would:

Create job opportunities for disadvantaged workers who face barriers to employment, as well as connect participants with wraparound services on an as-needed basis to support them in their work

Help workers who experience prolonged spells of unemployment re-enter the labor force

Provide opportunities for businesses to train prospective new employees

Serve as an automatic economic stabilizer during economic downturns

Lawmakers should consider subsidized jobs as an important component of an economic mobility agenda for the 21st century.

Rachel West is a Senior Policy Analyst with the Poverty to Prosperity Program at the Center for American Progress. Rebecca Vallas is the Director of Policy for the Poverty to Prosperity Program at the Center. Melissa Boteach is the Vice President of the Poverty to Prosperity Program at the Center.

Roger Witherspoon helps his daughter with her homework in Nashville, Tennessee.

Stable, healthy marriages and relationships can bolster the economic security and well-being of adults and children. Too often, however, national debates about the American family have been limited to arguing the merits of married versus single parenthood or “traditional” families versus “alternative” ones. An underlying assumption often seems to be that these are static types of families that children are born into and remain in until they leave home.

Reality is much more complex. Relatively few children—less than one in four—currently live in families with married parents in which only the father is employed, compared to the roughly two in three children who did in 1960. Families in the United States—including those headed by married parents—appear to be much more unstable than in most other wealthy nations. In fact, more than half of U.S. children today will spend at least part of their childhoods not living with two biological parents, even though the vast majority of children begin their lives living with both of them. A family headed by only one adult is typically not a permanent state; rather, it is more frequently a transitional situation. Moreover, grandparents, other kin, and parents living apart from their children often play major and supporting roles in their children’s upbringing.

This complex reality does not mean that policymakers should throw up their hands and conclude that public policy can do little to influence children’s or adults’ stability and well-being via family-related policies. As argued in this report, a clear-eyed approach that better aligns family policy with the lived experience of 21st century families could provide the necessary supports to improve American family life. Such an approach should eschew simple diagnoses and prescriptions, such as the idea held by some conservatives that onlythe decline in marriage needs to be reversed, primarily through cultural change, or the idea held by some progressives that only the economy needs to be fixed.

This report aims to move beyond these simple binaries that tend to structure public debate in this area. In addition to reviewing the extensive research that has been done on families today, this report offers a new framework for understanding family indicators that can influence child and adult outcomes and highlights some key economic and social policies that would strengthen family commitments and reduce family disparities. While the approach taken in this report is informed by empirical research, just as importantly, it is also based on core values. At a basic level, human beings need love, care, connection, and belonging. Family bonds that fulfill these basic needs come in many guises, each of which deserves society’s support and respect. The recommendations would update family policy in ways that make it more likely that all of our families are stable, healthy, and strong.

Part I of this report briefly reviews some key trends related to family change in recent decades, including the decline in the share of children living with their married parents and the increasing likelihood that children will spend part of their childhood with unmarried cohabiting parents, as well as stepparents.

Part II argues that a modern approach to family policy needs to encompass three related factors: family structure, family stability, and family strength—a new framework called the three S’s.

Considering these three factors together yields a richer and more balanced understanding of how family factors influence well-being and economic security than would focusing exclusively on any single one. Both rigorous research and widely held public understanding tell us that any of the three S’s can trump one or both of the others when it comes to well-being, depending on the context and circumstances in which individual families find themselves.

Part III discusses class gaps related to the three S’s. Noneconomic factors such as changes in social norms and technology, as well as economic factors such as growing inequality, have both contributed to major changes in family structure, stability, and strength since the 1960s. At the same time, the growth in economic inequality since the 1970s has profoundly shaped and constrained the family-related choices facing parents without four-year college degrees. As a result, compared to better-off families, struggling and working-class families increasingly lack the resources needed to avoid and navigate family instability and conflict. This has contributed to growing differences on indicators related to the three S’s between socioeconomic classes.

The final part of this report outlines a policy agenda to reduce the risks that all families face related to the three S’s but with a particular emphasis on reducing class gaps in these risks. The proposed policy agenda has both an economic and a social plank.

The economic plank includes recommendations to tackle economic factors that have made families—and particularly working-class families—more vulnerable to risks related to the three S’s. These recommendations include:

Increasing overall employment

Increasing the minimum wage substantially, strengthening basic labor standards, and making it easier for workers to form and join labor unions

Substantially increasing the earned income tax credit, or EITC, for adults without custodial children, and particularly young adults

Ensuring that disadvantaged married and cohabiting couples have meaningful access to key work and income supports

Reducing marriage penalties in the Supplemental Security Income, or SSI, program for people with disabilities

Enacting work-family policies, including paid family leave, earned sick days, and high-quality child care, and increasing the availability of flexible and predictable work schedules

Improving access to postsecondary education and training for both men and women

The social plank includes recommendations to provide socialsupports and services that reduce the risks that all families face related to the three S’s but that would also disproportionately help low-income and working-class families. Specifically, these recommendations include:

Increasing access to birth control and other reproductive health services

This report also highlights the need to reform the United States’ immigration and criminal justice systems to avoid separating families unnecessarily.

This report provides much more detail on the social plank than the economic one, largely because the Center for American Progress has already written extensively on economic policies that would promote shared prosperity. It is important to note, however, that real progress on the three S’s will only be made with the implementation of both economic and social reforms such as those outlined in this report.

Shawn Fremstad is a Senior Fellow at Center for American Progress and a senior research associate at the Center for Economic and Policy Research. Melissa Boteach is the Vice President of the Poverty to Prosperity Program at Center for American Progress.

In other countries, public policy has long been used as a way to help all women stay at work and thrive—the necessary preconditions for their long-term career advancement. But in the United States, where market conditions determine who gets access to such policies, only the most fortunate women are offered the kinds of supports that make work-life integration possible.

Emily Baxter is a Research Assistant for the Economic Policy team at the Center.Judith Warner is a Senior Fellow at the Center for American Progress.Sarah Jane Glynn is the Associate Director for Women’s Economic Policy at the Center for American Progress.

The problem is all too familiar: Despite women’s increased rates of employment, rising levels of educational development, and growing place as primary breadwinners, gender inequality remains pervasive. Women continue to be underrepresented in key decision-making positions in politics, business, and public life.

In the United States, the discussion of this conundrum tends to focus on personal improvement and the notion of “leaning in” popularized by Facebook COO Sheryl Sandberg. However, a number of developed nations, particularly those in Europe, have sought to remedy gender inequality primarily through public policy.

This report aims to analyze and understand the benefits and limitations of such policies by exploring the direct and indirect roles that they play in supporting women’s progress in the workforce and, specifically, in helping boost their advancement into leadership positions. It looks at policies that tackle the leadership issue via quotas—which aim to have a direct impact on women’s representation—and also examines policies such as affordable child care, paid parental leave, and flexible work arrangements that help lay the groundwork for women’s leadership indirectly by enabling women to stay in the workforce after becoming mothers.

Examining the differences in employment rates between mothers and nonmothers is one way to clearly see how well a country does—or does not—support women’s abilities to remain active in the workforce throughout their adult lives. Through a detailed discussion of policies abroad, this report will show that countries that have affordable and high-quality child care systems—for example, the Scandinavian nations—tend to have higher maternal employment rates, paving the way for women’s advancement. Paid parental leave and flexible work policies with genuine choices for both parents can also be a retention tool that, by offering mothers and fathers the ability to work and to care, aid women’s long-term prospects and advance the goals of gender equality more generally.

Through an in-depth analysis of the results of Norway’s 2003 law imposing gender quotas on corporate boards, this report will show that quotas—numerical targets for women’s representation—are an effective way to achieve specific, identified goals. However, it will argue that, to date, the ambition of quota policies has been to support professional women who already are close to the top. If policymakers want to enable women of all income levels and educational backgrounds to enter the workplace and advance—thereby developing a pipeline for future leaders—affordable and universal child care, progressive parental leave, and opportunities to work flexibly must form the core of a wide-reaching policy agenda.

Dalia Ben-Galim is an associate director at the Institute for Public Policy Research, or IPPR, the United Kingdom’s leading progressive think tank. Amna Silim is a former research fellow at IPPR.

]]>For Women to Lead, They Have to Stay in the Gamehttps://www.americanprogress.org/issues/women/report/2014/12/11/102842/for-women-to-lead-they-have-to-stay-in-the-game/
Thu, 11 Dec 2014 17:39:05 +0000https://www.americanprogress.org/issues/default/report/2014/12/09/102842//

SOURCE: iStockphoto

The need for public policy springs from the fact that relying upon employers to “do the right thing” for women just does not work.

The issue of women’s “leadership” is, at its core, about women’s economic empowerment and advancement: their ability to get into the workforce, stay in the workforce, and rise. At a time when roughly half of all American workers are women and two-thirds of families rely on a female breadwinner or co-breadwinner to make ends meet, the ability of women to fully deploy their resources and work to the full extent of their capabilities is of urgent importance to family economic security—and to the fortunes of our nation as a whole.

And yet, the public conversation about women’s leadership in the United States— kick-started over the past 18 months by the colossal success of Sheryl Sandberg’s best-selling book, Lean In—has been strikingly narrow. In the scope of the problem it depicts, the population of women it addresses, and the range of options it envisions as means for change, the discussion has been limited in ways that have left the vast majority of women out in the cold. Its thought leaders have been mostly white, wealthy, prestigiously educated business leaders, politicians, and media celebrities. And the solutions they have typically aired—from negotiating for better salaries to closing the “confidence gap” through self-improvement—have presupposed levels of choice, control, and empowerment far out of the reach of all but the most privileged.

The narrowness of the conversation is particularly striking because the problem is, in fact, so broad. Women have outnumbered men on college campuses since 1988.They hold almost 52 percent of all professional-level jobs. They have earned at least a third of law degrees since 1980,were fully a third of medical school students by 1990,and since 2002, have outnumbered men in earning undergraduate business degrees. And yet, in a broad range of fields, the presence of women in top leadership positions—as equity law partners, medical school deans, and corporate executive officers, for example—remains stuck at a mere 10 percent to 20 percent. (For more detail, please see “Women’s Leadership: What’s True, What’s False, and Why It Matters.”)

A truly meaningful approach to addressing and closing the women’s leadership gap has to involve all women. The social and economic realities of American life today require us to broaden the concept of leadership. Instead of focusing exclusively on rare, elite, top-of-the-pyramid hyper-achievers, we instead must look at how every woman—regardless of her background, education level, or professional status—can participate to the greatest extent possible in the public life of our society. That change of perspective means taking a very close look at the issues that cause women to stall out in the career pipeline or drop out altogether, as both high-level professional women and low-income women are too frequently compelled to do. Re-examining the issue of women’s leadership through this lens means shifting the conversation away from what women can do for themselves and looking instead at the structural impediments that keep them from achieving their goals.

And that shift, this report argues, inevitably points to the need for public policy. Public policy directed at increasing women’s leadership opportunities falls into two main categories. One set of measures directly aims to increase women’s representation in politics and in top corporate leadership roles through mandated numerical targets or through “report or explain” provisions, which require companies to publicly disclose the percentage of women on their boards and executive committees. The other category is work-family policy—measures such as paid family leave, paid sick days and vacation days, flexible work scheduling, subsidized child care, and part-time work with proportional pay and benefit parity. In addition to fostering more opportunities for women, these policies also serve a powerful symbolic function, signaling at every level of our society that women’s economic empowerment and advancement is a public good.

Examples of such policies are detailed in this report, and include:

Tax policies that encourage women’s labor-force participation

Policies that make high-quality, early childhood education accessible and affordable

A national system of paid family leave

Legislation guaranteeing all workers the right to request flexible work arrangements

The use of existing anti-discrimination laws to pursue employers who stigmatize workers for taking leave

Policies that incentivize companies to step up their efforts on behalf of women’s advancement through better reporting and greater transparency

The need for public policy springs from the fact that relying upon employers to “do the right thing” for women just does not work. While employers are now greatly motivated to attract and retain top female talent—i.e., high-earning professionals—through programs and policies that aim to help these women stay in their jobs and thrive, they have few, if any, incentives to cultivate and invest in their lower-wage female workforce. Public policy can and must be used to help women who are not already part of the professional elite to integrate their work and family responsibilities, stay in the workforce, and rise above the “sticky floor” of low-wage, low-status employment. Without such a goal, the women’s leadership conversation will necessarily continue to exclude a great many women who could be the key decision makers of tomorrow.

Judith Warner is a Senior Fellow at the Center for American Progress.

]]>Continued Job Gains Are Sweet Music, and There Is Reason to Hope It’s Not the Same Old Song for Wageshttps://www.americanprogress.org/issues/economy/news/2014/12/08/102657/continued-job-gains-are-sweet-music-and-there-is-reason-to-hope-its-not-the-same-old-song-for-wages/
Mon, 08 Dec 2014 15:14:43 +0000https://www.americanprogress.org/issues/default/news/2014/12/05/102657//

SOURCE: AP/Robert F. Bukaty

Muslima Hassan trims the rubber bottom of an L.L. Bean boot at a facility in Lewiston, Maine.

Friday’s Employment Situation Report from the U.S. Bureau of Labor Statistics, or BLS, wowed with 321,000 jobs added even as the unemployment rate held steady at 5.8 percent. For the past few months, looking under the hood of the report made the labor market seem much stronger than it appeared on the surface. While that trend did not continue, Friday’s report is another data point confirming that the labor market is returning to normal health—and with lots of room to grow.

While Friday’s coverage of the report was overwhelmingly positive, much of the exuberance was because the report so outperformed expectations—the markets only expected the addition of 230,000 new jobs. While the payroll gains were great, the broader measures of the labor market were not nearly as newsworthy. The employment to population ratio was flat in November as was the labor force participation rate, which “has been essentially unchanged since April,” according to the BLS. The overall trend was mirrored in most subgroup figures.

This is not to say there were not some subtle bright spots on hiring. September and October figures were revised upward, adding a total of 44,000 new jobs, and this month marked the 50th consecutive month of employment gains. Another good sign was a fall in the number of underemployed people. According to the report, 177,000 fewer Americans worked part time for economic reasons in November than in October, and that number has decreased by 873,000 individuals over the past year. Finally, the broadest measure of unemployment, U-6, fell for a fifth consecutive month. Over the past year, this measure has fallen from 13.1 percent to 11.4 percent. In other words, the improving health of the labor market is not just a numbers game, it is for real.

Students of macroeconomics should not be too shocked that job gains have been strong this fall. Employment is a lagging indicator of macroeconomic health, so economists would expect improvement in hiring to follow the strong gross domestic product, or GDP, reports for the second and third quarters of 2014. Moreover, there is reason to believe this trend should endure, as leading indicators continue to show a strengthening economy—most strikingly, a run of red hot auto sales this year.

So does all this activity help workers who already have jobs? Maybe. Employment may be a lagging indicator, but wage growth lags even employment. Consequently, it is still too soon to say exactly what is happening in terms of wage growth based on any given month. Two of the best bits of news for workers in this report were significant gains in both hourly wages, up 0.4 percent, and the index of weekly payrolls—the most complete measure of workers’ incomes in the report—which was up 0.9 percent.

If you look back further, wage gains over the past year were nothing to write home about, but given the sluggishness of income growth in this recovery, the economy can use all the good news it can get on wages. Given the slack in the economy—the many workers who are still on the sidelines—it is hard to predict if this month’s wage gains are just a blip or if wage growth is accelerating and catching up to historical norms. Let’s hope the latter is the case.

Inflation hawks will surely take this report as a sign that monetary policy should be tightened. But between the ground that needs to be made up on wage growth, the millions of additional workers who could rejoin the labor force if wages rise, and falling gas prices, one would have to grasp at a lot of straws to worry about inflation. It is hard to make much of a case that the Federal Reserve should slow this economy down, especially with January’s advent of an even more divided government suggesting that there is little chance of economic help from elected officials in Washington.

Job seekers sign in before meeting prospective employers during a career fair at a hotel in Dallas, January 2014.

Since the end of the Great Recession, the economy has added 8.3 million jobs, and the unemployment rate has fallen from 10 percent to 5.7 percent. The labor market is much healthier today than at any point since the Great Recession, but beneath the top-line numbers, it still has a long way to go before it returns to historically healthy conditions. Since March, the Federal Reserve has tacitly acknowledged the widening gap between the reality of the labor market and its most well-known measures by switching from a quantitative unemployment threshold to more comprehensive “measures of the labor market” in its forward guidance. The question, then, is this: What is happening with these broader labor-market indicators the Federal Reserve is looking at? Here’s a quick tour of the most important jobs data you should see in the headlines but rarely do.

Who’s working, who isn’t, and why

When the economy is doing well, more people typically enter the labor market because there are more jobs available. So we should expect the labor-force participation rate to be increasing in the aftermath of the recession. It hasn’t been. Instead, it’s declined steadily since the end of the recession and is as low today as it was in the late 1970s, when women were entering the workforce for the first time. Even with the positive developments we have seen in 2014, labor-force participation is still stuck where it was at the end of 2013.

One explanation for the decline in labor-force participation is that as Baby Boomers age, more Americans are in retirement. The fact that we see the same postrecession trend among 25- to 54-year-olds, people in their prime working years, makes this theory hard to support.

Underemployed and uncounted job hunters

Policymakers and pundits have taken far too much comfort in the decline in the headline unemployment rate. The extent to which unemployment has dropped depends on how it’s measured, especially in this recovery. The typical measure, called U-3 by economists, is pretty restrictive: It counts the percentage of people who are actively looking for work but cannot find it. There are other, broader measures we can look at. Perhaps the most complete picture, called U-6, includes marginally attached workers—those who have looked for work recently but are not looking currently—and those working part time who would prefer full-time work. U-6 is always higher than U-3, but it has gotten a lot higher since the recession, and the gap has been essentially unchanged since January.

Long-term unemployment

Another reason that the traditional unemployment rate is less informative about the overall health of the labor market is the fact that today the number of long-term unemployed, while down sharply from its postrecession peak, is still almost 50 percent higher than its highest prerecession level on record. There are still 2.9 million Americans who have been unemployed for half a year or longer and are still actively searching for work. Thirty-two percent of all unemployed fall into this long-term unemployed category. The average length of time someone has spent unemployed is about seven-and-a-half months, almost double what it was before the recession.

Weak job growth

As for job growth, during the economic expansion of the 1990s, the economy added at least 250,000 jobs per month 47 times. During the current expansion, which has now lasted roughly half as long, we have seen only six months of job growth greater than 250,000, which includes abnormal hiring involved with conducting the decennial census. Meanwhile, at the average rate of job growth over the past three years, The Hamilton Project estimates that we will not reach our former level of employment, when factoring in new labor-force entrants, until mid-2019.*

Insecure labor force

Another approach is to think about what data we would expect to see if the labor market were healthy and look for that data—or the absence of that data. In a healthy labor market, there is a tremendous amount of churn, with roughly 2 million workers flowing in and out of jobs each month. This is crucial for the U.S. economy, as it represents workers and firms finding better, more productive matches. During times of economic uncertainty, however, people are hesitant to leave their jobs. We cannot directly measure something such as overall job fit, but we can make reasonable inferences about these things by looking at the rate at which workers quit their jobs. As you might expect from the rest of the data we have explored, quit rates are conspicuously low, yet another indicator of a still sluggish labor market.

Declining real wages mean there is still slack in labor markets

One other way of analyzing the health of the labor market is to treat it like any other market, where supply and demand determine prices—or wages, in this case. We want a labor market that is improving and adding more jobs. If the market is improving, we should see more jobs and upward pressure on the cost of labor. Is there evidence of rising real compensation? Hardly. The Employment Cost Index, a more complete measure than basic hourly wage growth, shows falling real wages since the recession. Negative real wage growth means the amount of slack in the market is still considerable.

Conclusion

We have been living with the effects of the Great Recession for nearly six years, and the unemployment rate has never told a story of the labor market as incomplete as it does today. When policymakers talk about the need to let off the gas pedal and start tightening policy, which Congress has been proudly doing since 2010, they are consciously or unconsciously taking a myopic view of the labor market’s recovery and causing permanent damage to the economy.

Complacency among policymakers has become increasingly entrenched as the recovery lumbers on. Recent data do show that we are headed in the right direction but not nearly fast enough, and we certainly have not arrived at our destination. People usually assume that restraint and caution is safer, but there are situations in which this instinct makes one much less safe. During recovery from a deep recession, speed is safety. If we do not aggressively reintroduce the workers who have left the labor force and reduce the number of long-term unemployed, not only would it be an injustice to them, but it would also be a huge, permanent shrinking of the American economy as a whole.

Michael Madowitz is an Economist at the Center for American Progress. Jackie Odum is a Research Assistant with the Economic Policy team at the Center.

]]>Key Features of a Paid Family and Medical Leave Program that Meets the Needs of Working Familieshttps://www.americanprogress.org/issues/labor/report/2014/12/01/102244/key-features-of-a-paid-family-and-medical-leave-program-that-meets-the-needs-of-working-families/
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SOURCE: AP/Brian Chilson

Lori Latch with her husband Chad; son Marcus, right rear; son Eric, front left; and daughter Ruby at their home in North Little Rock, Arkansas.

Working people’s need for family and medical leave is nearly universal. But unfortunately, only 12 percent of workers in the United States have access to paid family leave through their employers to care for a new child or seriously ill family member, and fewer than 40 percent have access to personal medical leave through short-term disability insurance provided through their jobs.

In order to update our nation’s public policies to effectively meet the needs of workers and their families, and to bring the country in line with virtually every other nation in the world, the United States should adopt a paid family and medical leave policy that covers all workers and is accessible, comprehensive, affordable, and inclusive.

1. Available to all workers

The United States needs to move beyond the current patchwork of workplace leave protections to ensure that all workers have the ability to access leave. In order to meet the needs of workers, families, businesses, and the nation overall, any proposal must provide all workers with the ability to earn paid time away from work to care for themselves or a family member. Paid family and medical leave should be available to people regardless of the size or sector of their employers and whether they work full time, part time, or are self-employed. And any proposal should give people the freedom to relocate to another state or switch jobs without losing access to leave. It must also offer women and men equal amounts of leave time. Caring for a new child or seriously ill loved one is no longer “women’s” work. Men experience higher rates of conflict between work and family than women do, and men increasingly want to be caregivers.

2. Comprehensive and specific in addressing serious family and medical needs

To ensure leave is available for the key reasons people need time away from their jobs, a paid family and medical leave proposal must be comprehensive. It should be sufficient in length and include specific language to cover the range of well-established reasons people need time away from work, such as those established under the Family and Medical Leave Act. These reasons include: addressing a personal serious health condition or the serious health condition of a parent or other family member; caring for a new baby, a newly adopted child, or a newly placed foster child; or addressing the exigencies arising from a military family member’s deployment.

3. Affordable and cost-effective

It is important for any paid family and medical leave proposal to be affordable and cost-effective for employees, employers, and the government. It should replace a significant portion of a worker’s usual wages—enough to allow workers to take the time they need without jeopardizing their ability to afford the basics. It should also be affordable for employers and should coordinate with existing benefits offered by employers and state and federal programs.

4. Inclusive

A paid family and medical leave proposal should include a definition of “family” that recognizes diverse families and care responsibilities today. As family demographics shift, parents of young children are not the only types of workers with significant caregiving responsibilities. Thus any proposal should also cover care for elders and recognize same-sex families.

5. Available without adverse employment consequences

Paid family and medical leave needs to be available without any adverse employment consequences. Any proposal should include provisions that protect workers against discrimination or retaliation for needing or taking leave. Furthermore, employees should not be forced to give up important workplace rights or labor protections in order to gain access to paid leave.

Conclusion

Regardless of how a national paid family and medical leave program is financed, structured, and implemented, any program must meet the principles outlined here in order to adequately address the needs of working families today.

Both the economy and jobs remain front and center on the minds of Americans. Considering that the United States is officially in the sixth year of an economic recovery, this would be surprising were it not for the economic data telling us that the nation is going through an unusually weak economic expansion. Economic productivity, which generates the resources for future increases in living standards, has been growing more slowly in this recovery than in any other recovery of at least equal length since World War II. Job growth has therefore been modest and is only now, albeit slowly, picking up steam. Many vulnerable groups struggle with high unemployment rates. Moreover, middle-class incomes are falling, household debt remains high, and the housing market—which generally drives the economy to faster growth after a recession—is consequently still stuck at a relatively low level, holding back economic growth. To make matters worse, governments—federal, state, and local—engaged in wrongheaded austerity measures in the middle of an already weak recovery and further slowed economic growth. This all adds up to an economy caught in the doldrums, leaving middle-class Americans worried about their future.

It doesn’t have to be this way. There are substantial resources to build a stronger economy. Corporate profits levels are high and continue to grow, incomes at the top have risen strongly, and government budget deficits are shrinking and, in some cases, even turning into surpluses. A different fiscal and regulatory regime that puts people first would lead to faster growth that benefits everyone, not just the lucky few. This means investing in the future through infrastructure spending on roads, bridges, and schools; making the tax code simpler, fairer, and more efficient; raising wages through a higher minimum wage; making it easier to join a union; and offering meaningful benefits, such as health insurance, retirement savings, and paid sick leave to all workers.

1. Economic growth in this recovery lags behind that of previous business cycles. GDP increased in the third quarter of 2014 at an inflation-adjusted annual rate of 3.5 percent, after an increase of 4.6 percent in the previous quarter. Domestic consumption increased by an annual rate of 1.8 percent, and housing spending rose by 1.8 percent, while business investment growth also increased at a rate of 5.5 percent. Exports increased 7.8 percent in the third quarter, which was offset by even faster import growth of 1.7 percent. Federal government spending rose by 10 percent, while state and local government spending increased by only 1.3 percent. The economy expanded 12.5 percent from June 2009 to September 2014—its slowest expansion during recoveries of at least equal length.

2. Improvements to U.S. competitiveness fall behind previous business cycles. Productivity growth, measured as the increase in inflation-adjusted output per hour, is key to increasing living standards, as it means that workers are getting better at doing more in the same amount of time. Slower productivity growth thus means that new economic resources available to improve living standards are growing more slowly than would be the case with faster productivity growth. U.S. productivity rose 7.2 percent from June 2009 to September 2014, the first 21 quarters of the economic recovery since the end of the Great Recession. This compares to an average of 14.8 percent during all previous recoveries of at least equal length. No previous recovery had lower productivity growth than the current one.

3. The housing market recovery still struggles to gain momentum. New-home sales amounted to an annual rate of 467,000 in September 2014—a 17 percent percent increase from the 399,000 homes sold in September 2013 but well below the historical average of 698,000 homes sold before the Great Recession. The median new-home price in September 2014 was $259,000, up from one year earlier.Existing-home sales increased by 2.4 percent in September 2014 from one year earlier, and the median price for existing homes was up by 5.6 percent during the same period. Home sales have to go a lot further, given that homeownership in the United States stood at 64.4 percent in the third quarter of 2014, down from 68.2 percent before the 2007 recession. The current homeownership rates are similar to those recorded in 1996, well before the most recent housing bubble started.A strong housing-market recovery can boost economic growth, and there is still plenty of room for the housing market to provide more stimulation to the economy more broadly than it did before the recent slowdown.

4. Moderate labor-market recovery shows less job growth than in previous business cycles. There were 8.7 million more jobs in October 2014 than in June 2009. The private sector added 9.4 million jobs during this period. The loss of some 559,000 state and local government jobs explains the difference between the net gain of all jobs and the private-sector gain in this period. Budget cuts reduced the number of teachers, bus drivers, firefighters, and police officers, among others. The total number of jobs has now grown by 6.7 percent during this recovery, compared to an average of 13.2 percent during all prior recoveries of at least equal length.

5. Employment opportunities grow very slowly for people in their prime earning years. The employed share of the population from ages 25 to 54—which is unaffected by the aging of the overall population—was 76.9 percent in October 2014. This was just above the level recorded in June 2009 and well below the levels recorded since the mid-1980s and before the Great Recession started in 2007. The employed share of the population has, on average, grown by 3.4 percentage points at this stage during previous recoveries of at least equal length.

6. Employers cut back on health and pension benefits. The share of people with employer-sponsored health insurance dropped from 59.8 percent in 2007 to 53.9 percent in 2013, the most recent year for which data are available. The share of private-sector workers who participated in a retirement plan at work fell to 40.8 percent in 2013, down from 41.5 percent in 2007. Families now have less economic security than in the past due to fewer employment-based benefits, which requires them to have more private savings to make up the difference.

7. Some communities continue to struggle disproportionately from unemployment. The unemployment rate fell to 5.8 percent in October 2014. The African American unemployment rate fell slightly to 10.9 percent, the Hispanic unemployment rate ticked down to 6.8 percent, and the white unemployment rate fell to 4.8 percent. Meanwhile, youth unemployment decreased to 18.6 percent. The unemployment rate for people without a high school diploma was 7.9 percent, compared with 5.7 percent for those with a high school degree, 4.8 percent for those with some college education, and 3.1 percent for those with a college degree. Population groups with higher unemployment rates have struggled disproportionately more amid the weak labor market than white workers, older workers, and workers with more education.

8. The rich continue to pull away from most Americans. Incomes of households at the 95th percentile—those with incomes of $196,000 in 2013, the most recent year for which data are available—were more than nine times the incomes of households in the 20th percentile, whose incomes were $20,900. This is the largest gap between the top 5 percent and the bottom 20 percent of households since the U.S. Census Bureau started keeping records in 1967. Median inflation-adjusted household income stood at $51,939 in 2013, its lowest level in inflation-adjusted dollars since 1995.

9. Corporate profits stay elevated near pre-crisis peaks. Inflation-adjusted corporate profits were 94 percent larger in June 2014 than in June 2009. The after-tax corporate profit rate—profits to total assets—stood at 3.2 percent in June 2014. Corporate profits recovered quickly toward the end of the Great Recession and have stayed high since then. Addressing income inequality that arises from the rich receiving outsized benefits from their wealth through tax reform is a crucial policy priority.

10. Corporations spend much of their money to keep shareholders happy. From December 2007—when the Great Recession started—to June 2014, nonfinancial corporations spent, on average, 99.6 percent of their after-tax profits on dividend payouts and share repurchases. In short, almost all of nonfinancial corporate after-tax profits have gone to keeping shareholders happy during the current business cycle. Nonfinancial corporations also held, on average, 5.3 percent of all of their assets in cash—the highest average share since the business cycle that ended in December 1969. Nonfinancial corporations spent, on average, 163.4 percent of their after-tax profits on capital expenditures or investments—by selling other assets and by borrowing. This was the lowest ratio since the business cycle that ended in 1960. U.S. corporations have prioritized keeping shareholders happy and building up cash over investments in structures and equipment, highlighting the need for regulatory reform that incentivizes corporations to invest in research and development, manufacturing plants and equipment, and workforce development.

11. Poverty is still widespread. The poverty rate was 14.5 percent in 2013, down from 15 percent in 2012. This change, however, was statistically insignificant. Moreover, the poverty rate for this recovery increased at a rate of 0.2 percentage points, compared to an average decrease of 0.7 percentage points in previous recoveries of at least equal length. Some population groups suffer from much higher poverty rate than others. The African American poverty rate, for instance, was 27.2 percent, and the Hispanic poverty rate was 23.5 percent, while the white poverty rate was 9.6 percent. The poverty rate for children under age 18 fell to 19.9 percent. More than one-third of African American children—37.7 percent—lived in poverty in 2013, compared with 30.4 percent of Hispanic children and 10.7 percent of white children.

12. Household debt is still high. Household debt equaled 102.4 percent of after-tax income in June 2014, down from a peak of 129.7 percent in December 2007. A return to debt growth outpacing income growth, which was the case prior to the start of the Great Recession in 2007, from already-high debt levels could eventually slow economic growth again. This would be especially true if interest rates also rise from historically low levels due to a change in the Federal Reserve’s policies. Consumers would have to pay more for their debt, and they would have less money available for consumption and saving.

Christian E. Weller is a Senior Fellow at the Center for American Progress and a professor in the Department of Public Policy and Public Affairs at the McCormack Graduate School of Policy and Global Studies at the University of Massachusetts, Boston. Jackie Odum is a Research Assistant for the Economic Policy team at the Center.

Since the end of the Great Recession, the economy has added 8.5 million jobs, and the unemployment rate has fallen from 10 percent to 5.9 percent. The labor market is much healthier today than at any point since the Great Recession, but beneath the top-line numbers, it still has a long way to go before it returns to historically healthy conditions. Since March, the Federal Reserve has tacitly acknowledged the widening gap between the reality of the labor market and its most well-known measures by switching from a quantitative unemployment threshold to more comprehensive “measures of the labor market” in its forward guidance. The question, then, is this: What is happening with these broader labor-market indicators the Federal Reserve is looking at? Here’s a quick tour of the most important jobs data you should see in the headlines but rarely do.

Who’s working, who isn’t, and why

When the economy is doing well, more people typically enter the labor market because there are more jobs available. So we should expect the labor-force participation rate to be increasing in the aftermath of the recession. It hasn’t been. Instead, it’s declined steadily since the end of the recession and is as low today as it was in the late 1970s, when women were entering the workforce for the first time. Even with the positive developments we have seen in 2014, labor-force participation is still stuck where it was at the end of 2013.

One explanation for the decline in labor-force participation is that as Baby Boomers age, more Americans are in retirement. The fact that we see the same postrecession trend among 25- to 54-year-olds, people in their prime working years, makes this theory hard to support.

Underemployed and uncounted job hunters

Policymakers and pundits have taken far too much comfort in the decline in the headline unemployment rate. The extent to which unemployment has dropped depends on how it’s measured, especially in this recovery. The typical measure, called U-3 by economists, is pretty restrictive: It counts the percentage of people who are actively looking for work but cannot find it. There are other, broader measures we can look at. Perhaps the most complete picture, called U-6, includes marginally attached workers—those who have looked for work recently but are not looking currently—and those working part time who would prefer full-time work. U-6 is always higher than U-3, but it has gotten a lot higher since the recession, and the gap has been essentially unchanged since January.

Long-term unemployment

Another reason that the traditional unemployment rate is less informative about the overall health of the labor market is the fact that today the number of long-term unemployed, while down sharply from its postrecession peak, is still almost 50 percent higher than its highest prerecession level on record. There are still 3 million Americans who have been unemployed for half a year or longer and are still actively searching for work. Thirty-two percent of all unemployed fall into this long-term unemployed category. The average length of time someone has spent unemployed is about seven-and-a-half months, almost double what it was before the recession.

Weak job growth

As for job growth, during the economic expansion of the 1990s, the economy added at least 250,000 jobs per month 47 times. During the current expansion, which has now lasted roughly half as long, we have seen only six months of job growth greater than 250,000, which includes abnormal hiring involved with conducting the decennial census. Meanwhile, at the average rate of job growth over the past three years, The Hamilton Project estimates that we will not reach our former level of employment, when factoring in new labor-force entrants, until mid-2019.*

Insecure labor force

Another approach is to think about what data we would expect to see if the labor market were healthy and look for that data—or the absence of that data. In a healthy labor market, there is a tremendous amount of churn, with roughly 2 million workers flowing in and out of jobs each month. This is crucial for the U.S. economy, as it represents workers and firms finding better, more productive matches. During times of economic uncertainty, however, people are hesitant to leave their jobs. We cannot directly measure something such as overall job fit, but we can make reasonable inferences about these things by looking at the rate at which workers quit their jobs. As you might expect from the rest of the data we have explored, quit rates are conspicuously low, yet another indicator of a still sluggish labor market.

Declining real wages mean there is still slack in labor markets

One other way of analyzing the health of the labor market is to treat it like any other market, where supply and demand determine prices—or wages, in this case. We want a labor market that is improving and adding more jobs. If the market is improving, we should see more jobs and upward pressure on the cost of labor. Is there evidence of rising real compensation? Hardly. The Employment Cost Index, a more complete measure than basic hourly wage growth, shows falling real wages since the recession. Negative real wage growth means the amount of slack in the market is still considerable.

Conclusion

We have been living with the effects of the Great Recession for nearly six years, and the unemployment rate has never told a story of the labor market as incomplete as it does today. When policymakers talk about the need to let off the gas pedal and start tightening policy, which Congress has been proudly doing since 2010, they are consciously or unconsciously taking a myopic view of the labor market’s recovery and causing permanent damage to the economy.

Complacency among policymakers has become increasingly entrenched as the recovery lumbers on. Recent data do show that we are headed in the right direction but not nearly fast enough, and we certainly have not arrived at our destination. People usually assume that restraint and caution is safer, but there are situations in which this instinct makes one much less safe. During recovery from a deep recession, speed is safety. If we do not aggressively reintroduce the workers who have left the labor force and reduce the number of long-term unemployed, not only would it be an injustice to them, but it would also be a huge, permanent shrinking of the American economy as a whole.

Michael Madowitz is an Economist at the Center for American Progress. Jackie Odum is a Research Assistant with the Economic Policy team at the Center.

]]>A Win-Win for Working Families and State Budgetshttps://www.americanprogress.org/issues/poverty/report/2014/10/16/97672/a-win-win-for-working-families-and-state-budgets/
Thu, 16 Oct 2014 15:30:15 +0000Rachel West and Michael Reichhttp://www.americanprogress.org/issues/default/report/2014/09/23/97672//

SOURCE: AP/Rick Bowmer

An overhaul of the Medicaid system in Oregon aims to improve coordination of care between county-run health clinics, hospitals, doctor’s offices, and mental health providers.

How do minimum wage increases affect expenditures on means-tested public assistance programs?

At a time when concern over income inequality is growing—and there is contentious debate about government deficit spending—the possibility that a higher minimum wage may affect public assistance spending holds great relevance for both the public and policymakers. This possibility is particularly salient in the 24 states that have not expanded Medicaid under the Affordable Care Act, or ACA, as of January 2014.

In this paper, we suggest a strategy whereby states can simultaneously expand health care, boost the income of working families, and generate savings in their state budget by raising the minimum wage in conjunction with expanding Medicaid. Higher minimum wages will boost income among struggling working families. Medicaid expansion will lead to wider health care coverage, as well as a reduction in the number of uninsured and the significant public costs associated with the care of the uninsured.

This report finds that higher minimum wages lead to a statistically significant enrollment reduction in traditional Medicaid—that is, the portion of Medicaid for which states have always paid a substantial share of the cost. Specifically, the results of the econometric analysis developed in this report imply that a 10 percent increase in the minimum wage reduces traditional Medicaid enrollment among the non-elderly and non-disabled by 0.31 percentage points.

Thus, considered alongside Medicaid savings for states, the dual policy package of Medicaid expansion and higher minimum wages represents a win-win situation for state policymakers and low-income working families. Unlike states’ traditional Medicaid programs, the federal government pays the full cost of care for those who are newly eligible for the first three years—and the lion’s share thereafter—under the Medicaid expansion. This reduction in enrollment will lead states and their residents to save money on traditional Medicaid.

For the 24 states that did not expand Medicaid under the ACA beginning in 2014—the so-called nonexpansion states—our results imply that if implemented in 2014, a $10.10 per hour minimum wage coupled with Medicaid expansion would reduce states’ pre-ACA Medicaid expenditures by more than $2.5 billion per year. This represents a spending decrease of more than 1.5 percent among the nonexpansion states and 0.6 percent relative to national 2012 Medicaid expenditures. To arrive at these findings, we take account of the states’ 2014 minimum wage levels and use baseline Medicaid enrollment data from the year 2012, the most recent year for which data are available in our set.

If states chose to index their minimum wages to a measure of inflation—ensuring that the purchasing power afforded by the minimum wage would rise at the same rate as prices in the future—their respective minimum wages would increase at the same rate as Medicaid eligibility thresholds, which are tied to the federal poverty level, or FPL. Accordingly, the savings over a decade would be about 10 times greater than the one-year savings. In 2014 dollars, the 10-year savings across nonexpansion states would total approximately $25.1 billion.

The report proceeds as follows:

Section 1 provides background information on minimum wage policies and on the Medicaid program and discusses the interaction between them.

Section 2 describes the data we use and discusses our methods.

Section 3 provides our main results. We present a state-by-state simulation of the savings to states from increasing minimum wages to $10.10 per hour during Medicaid expansion.

Freddy Jerez fills out a job application during a job fair in Sunrise, Florida.

Since the end of the Great Recession, the economy has added 8.2 million jobs, and the unemployment rate has fallen from 10 percent to 6.1 percent. The labor market is much healthier today than at any point since the Great Recession, but beneath the top-line numbers, it still has a long way to go before it returns to historically healthy conditions. Since March, the Federal Reserve has tacitly acknowledged the widening gap between the reality of the labor market and its most well-known measures by switching from a quantitative unemployment threshold to more comprehensive “measures of the labor market” in its forward guidance. The question, then, is this: What is happening with these broader labor-market indicators the Federal Reserve is looking at? Here’s a quick tour of the most important jobs data you should see in the headlines but rarely do.

Who’s working, who isn’t, and why

When the economy is doing well, more people typically enter the labor market because there are more jobs available. So we should expect the labor-force participation rate to be increasing in the aftermath of the recession. It hasn’t been. Instead, it’s declined steadily since the end of the recession and is as low today as it was in the late 1970s, when women were entering the workforce for the first time. Even with the positive developments we have seen in 2014, labor-force participation is still stuck where it was at the end of 2013.

One explanation for the decline in labor-force participation is that as Baby Boomers age, more Americans are in retirement. The fact that we see the same postrecession trend among 25- to 54-year-olds, people in their prime working years, makes this theory hard to support.

Underemployed and uncounted job hunters

Policymakers and pundits have taken far too much comfort in the decline in the headline unemployment rate. The extent to which unemployment has dropped depends on how it’s measured, especially in this recovery. The typical measure, called U-3 by economists, is pretty restrictive: It counts the percentage of people who are actively looking for work but cannot find it. There are other, broader measures we can look at. Perhaps the most complete picture, called U-6, includes marginally attached workers—those who have looked for work recently but are not looking currently—and those working part time who would prefer full-time work. U-6 is always higher than U-3, but it has gotten a lot higher since the recession, and the gap has been essentially unchanged since January.

Long-term unemployment

Another reason that the traditional unemployment rate is less informative about the overall health of the labor market is the fact that today the number of long-term unemployed, while down sharply from its postrecession peak, is still almost 50 percent higher than its highest prerecession level on record. There are still 3 million Americans who have been unemployed for half a year or longer and are still actively searching for work. Thirty-three percent of all unemployed fall into this long-term unemployed category. The average length of time someone has spent unemployed is about seven-and-a-half months, almost double what it was before the recession.

Weak job growth

As for job growth, during the economic expansion of the 1990s, the economy added at least 250,000 jobs per month 47 times. During the current expansion, which has now lasted roughly half as long, we have seen only six months of job growth greater than 250,000, which includes abnormal hiring involved with conducting the decennial census. Meanwhile, at the average rate of job growth over the past three years, The Hamilton Project estimates that we will not reach our former level of employment, when factoring in new labor-force entrants, until mid-2019.*

Insecure labor force

Another approach is to think about what data we would expect to see if the labor market were healthy and look for that data—or the absence of that data. In a healthy labor market, there is a tremendous amount of churn, with roughly 2 million workers flowing in and out of jobs each month. This is crucial for the U.S. economy, as it represents workers and firms finding better, more productive matches. During times of economic uncertainty, however, people are hesitant to leave their jobs. We cannot directly measure something such as overall job fit, but we can make reasonable inferences about these things by looking at the rate at which workers quit their jobs. As you might expect from the rest of the data we have explored, quit rates are conspicuously low, yet another indicator of a still sluggish labor market.

Declining real wages mean there is still slack in labor markets

One other way of analyzing the health of the labor market is to treat it like any other market, where supply and demand determine prices—or wages, in this case. We want a labor market that is improving and adding more jobs. If the market is improving, we should see more jobs and upward pressure on the cost of labor. Is there evidence of rising real compensation? Hardly. The Employment Cost Index, a more complete measure than basic hourly wage growth, shows a falling or flat real wages since the recession. The lack of wage growth means the amount of slack in the market is still considerable.*

Conclusion

We have been living with the effects of the Great Recession for nearly six years, and the unemployment rate has never told a story of the labor market as incomplete as it does today. When policymakers talk about the need to let off the gas pedal and start tightening policy, which Congress has been proudly doing since 2010, they are consciously or unconsciously taking a myopic view of the labor market’s recovery and causing permanent damage to the economy.

Complacency among policymakers has become increasingly entrenched as the recovery lumbers on. Recent data do show that we are headed in the right direction but not nearly fast enough, and we certainly have not arrived at our destination. People usually assume that restraint and caution is safer, but there are situations in which this instinct makes one much less safe. During recovery from a deep recession, speed is safety. If we do not aggressively reintroduce the workers who have left the labor force and reduce the number of long-term unemployed, not only would it be an injustice to them, but it would also be a huge, permanent shrinking of the American economy as a whole.

Hanh Nguyen, an intern with the Immunogen Design Group, works at the AIDS Vaccine Design and Development Laboratory in New York City.

In 2007, spurred by a projected skills gap in South Carolina’s workforce, state policymakers and the South Carolina Technical College System established an innovative apprenticeship program called Apprenticeship Carolina. Today—after just seven years—Apprenticeship Carolina consists of around 700 employer partners and over 10,400 current and former apprentices. This is just one example of many innovative apprenticeship programs emerging across the United States. From Vermont to Michigan to Washington state, governments, employers, workforce planners, and education stakeholders are making important new investments in this critical workforce training tool.

As detailed in the recent Center for American Progress report, “Training for Success: A Policy to Expand Apprenticeships in the United States,” apprenticeship is a workforce-training model that combines on-the-job training with classroom-based instruction and has been proven to benefit employers, employees, and the overall economy. Apprenticeships allow businesses to meet the growing demand for skilled workers, and they lead workers to higher wages and better employment outcomes. Furthermore, they are a smart public investment. A recent study in Washington state found that for every $1 in state investment in apprenticeships, taxpayers received $23 in net benefits, a return that far exceeds that of any other workforce-training program in the state.

Although apprenticeships have proven to be an effective workforce-training tool, the United States has been slow to pick up the model. The Department of Labor, or DOL, through its Office of Apprenticeship, administers a small system of registered apprentices. Last year, the United States had about 375,000 registered apprentices, including 164,000 new apprentices who started programs in 2013. Per capita, these figures fall far below those of other nations, such as England, Switzerland, France, Germany, and Scotland. England, with a population one-sixth the size of the United States, had more than five times as many new apprentices as the United States in 2012. In England, a recent effort to expand apprenticeships has led to significant benefits for both workers and employers. English apprenticeship completers earn an average weekly wage 10 percent higher than that of noncompleters. Businesses report that apprentices have increased productivity; supplied a consistent, skilled labor force; reduced recruiting costs; and boosted employee retention.

There are a number of obstacles that have prevented the United States from establishing a larger apprenticeship system, not least of which is a lack of awareness among both businesses and workers about the value and promise that apprenticeships hold. Additionally, despite recent efforts by DOL to expand their reach, American apprenticeships are still largely dominated by traditional occupations, such as those in the building and construction trades. Unlike the governments of many other countries, the U.S. government offers little financial support to help employers offset the costs of sponsoring apprentices.

This may be changing, however, as U.S. policymakers increasingly look to apprenticeship as a key tool to develop a skilled workforce and to connect workers to good jobs. The Obama administration is investing in apprenticeship by making $100 million available for American Apprenticeship Grants through the DOL. These funds will support promising partnerships, launch new apprenticeships in high-growth fields—such as information technology, health care, and advanced manufacturing—and scale models that work.

This report examines a suite of innovative apprenticeship models from around the country. It provides detailed case studies of Vermont Healthcare and Information Technology Education Center, or Vermont HITEC; the Michigan Advanced Technologies Training program, or MAT2; the SEIU Healthcare NW Training Partnership; the National Institute for Metalworking Skills, or NIMS, Certified Registered Apprenticeship program; and Apprenticeship Carolina. From effective marketing and business engagement to financial incentives and thorough skills assessments, these models exemplify a number of compelling strategies to expand apprenticeships into new occupations and sectors and to increase overall apprenticeship enrollment.

Sarah Ayres Steinberg is a Policy Analyst with the Economic Policy team at the Center for American Progress. Ethan Gurwitz is a Research Assistant with the Economic Policy team at the Center.

Report chapters

Why the middle-class squeeze matters

The middle-class share of national income has fallen, middle-class wages are stagnant, and the middle class in the United States is no longer the world’s wealthiest.

But income is only one side of the story. The cost of being in the middle class—and of maintaining a middle-class standard of living—is rising fast too. For fundamental needs such as child care and health care, costs have risen dramatically over the past few decades, taking up larger shares of family budgets. The reality is that the middle class is being squeezed. As this report will show, for a married couple with two children, the costs of key elements of middle-class security—child care, higher education, health care, housing, and retirement—rose by more than $10,000 in the 12 years from 2000 to 2012, at a time when this family’s income was stagnant.

As sharp as this squeeze can be, the pain does not stop at one family, or even at millions of families. Because of the critical role that middle-class consumers play in creating aggregate demand, the American economy is in trouble when the American middle class is in trouble. And the long-term health of the U.S. economy is at risk if financially squeezed families cannot afford—and smart public policies do not support—developing the next generation of America’s workforce. It is this workforce that will lead the United States in an increasingly open and competitive global economy.

This report provides a snapshot of the American middle class and those struggling to become a part of it. It focuses on six key pillars that can help define security for households: jobs, early childhood programs, higher education, health care, housing, and retirement. Each chapter is both descriptive and prescriptive—detailing both how the middle class is doing and what policies can help it do better.

Defining the middle class

Statistically, when we talk about the middle class, we generally mean the middle three quintiles of American households by income—those making between the 20th and 80th percentiles of the income distribution. In reality, however, being middle class in America is at its core about economic security. As Sen. Tom Harkin (D-IA) wrote in the 2011 report “Saving the American Dream,” “Most of us don’t expect to be rich or famous, but we do expect a living wage and good American benefits for a hard day’s work.”

At the Center for American Progress, our work has focused on the importance of both strengthening and growing America’s middle class. So while the middle three quintiles will always be just that, it is our goal to ensure that as many Americans as possible have the cornerstones of the American Dream, including access to education, health care, housing, and the ability to retire.

So even as this report measures what has been happening to the middle class, we articulate our hopes for all Americans. To be clear, having more than 46 million Americans in poverty is both contrary to our national character and to our economic aspirations. So too is having millions of young people unemployed and underemployed and 11 million aspiring Americans living in the country without legal status.

Having more workers in good jobs—who have access to good education; affordable child care, health care, and housing; and the ability to retire with dignity—is our clear objective. The closer we get to this reality, the better it will be for all of our families and the sustainable growth of our economy.

What’s more, we know that areas with larger middle classes and less inequality also have more economic mobility. And opportunity is what America is about: 97 percent of Americans believe that every person should have an equal opportunity to get ahead in life. We all have an interest in a strong and growing middle class.

Squeeze part I: A snapshot of incomes

When we think about the golden age of the American middle class, we often think of the decades following World War II. To be sure, the mid-20th century legislated unequal treatment and therefore limited opportunities for many Americans, but even with that marked and deep-rooted inequality, the economic statistics from that period tell a story of growing wealth and security for America’s middle class.

From 1948 to 1973, America experienced a period in which growing compensation tracked growing worker productivity: A worker in 1973 was almost twice as productive as a worker in 1948 and earned nearly twice as much. This golden age built the middle class as prosperity was increasingly shared. The economy grew by an average of 3.9 percent from 1948 to 1973, and the bottom 90 percent of families reaped 68 percent of the gains.

However, around 1973, American productivity growth slowed, increasing about half as quickly between 1973 and the early 1990s as it had during the previous 25 years. Furthermore, compensation started to decouple from productivity, growing about one-third as quickly as before.

As the 1990s tech boom progressed and the economy heated up, productivity accelerated again: Productivity growth from 1991 to 2012 averaged 2.2 percent per year, yet compensation growth only averaged 1 percent per year. A worker today is almost 60 percent more productive than a worker in 1991 but has seen only half of that productivity growth translate into higher compensation. And the vast majority of this wage growth took place toward the end of the 1990s tech boom, as real wages and benefits jumped about 16 percent between 1995 and 2001.

Real compensation growth has slowed further since the start of the 21st century. What’s worse, health insurance premiums over this period ate into even modest compensation gains. Therefore, many Americans saw stagnant or declining take-home pay even as productivity continued to rise.

In other words, American workers have been squeezed for decades when it comes to take-home pay, even before 2007 and the Great Recession. The financial crisis and the Great Recession itself then took a catastrophic toll on millions of Americans, as unemployment skyrocketed and trillions of dollars in household wealth vanished. And while the economy has picked up since bottoming out in 2009, and private-sector job growth began to bounce back in 2010, the gains from this postcrash period have been strikingly unequal. Ninety-five percent of all income gains since the start of the recovery have accrued to the top 1 percent of U.S. households.

The trends in rising inequality are also striking when measured by wealth. Among the top 20 percent of families by net worth, average wealth increased by 120 percent between 1983 and 2010, while the middle 20 percent of families only saw their wealth increase by 13 percent, and the bottom fifth of families, on average, saw debt exceed assets—in other words, negative net worth. Families of color have fallen further behind white families in building wealth: A survey that tracked white and African American families between 1984 and 2009 found that the wealth gap between them nearly tripled, from $85,000 to $236,500. Homeowners in the bottom quintile of wealth lost an astounding 94 percent of their wealth between 2007 and 2010.

The importance of the middle class to economic growth

Rising inequality is not simply a question of distribution; it also poses real questions for how our economy operates. The increasing resources available to the wealthiest Americans have created demand for such luxuries as private jets—which creates jobs building those jets—but the declining purchasing power of middle-class Americans means that there is less demand for goods and services more broadly in the economy. A recent analysis showed that giving $1 to a low-income household produces three times as much consumption as giving $1 to a high-income household. And it is certainly true that increasing the concentration of wealth means more jobs managing finances and fewer jobs making the goods that middle-class consumers once bought in numbers that drove much of our economic growth.

CAP outlined the economic importance of a strong and growing middle class—and the concerns for our economy from growing inequality—in a 2012 report, “The American Middle Class, Income Inequality, and the Strength of the Economy.” The report details the importance of the middle class to human capital, stable demand, entrepreneurship, and support for institutions.

Squeeze part II: A snapshot of rising costs

While real incomes have been stagnant or declining in recent years, the other side of the story is the increase in the costs of various items that define a middle-class standard of living. Not only have families’ costs for things from higher education to health care increased rapidly relative to overall consumer inflation, but these costs are also consuming a growing share of family budgets, leaving less and less room for discretionary spending and saving.

When looking at the changes in consumer price indices for core elements of middle-class security, it is painfully easy to see the squeeze in action; prices for many cornerstones of middle-class security have risen dramatically at the same time that real incomes have fallen.

As stark as the data appear when comparing stagnant or falling incomes to rising prices, they are even worse than the Consumer Price Index above might suggest.

Let’s consider what has happened to the finances of a typical middle-class family since 2000.

The median family saw its income fall by 8 percent between 2000 and 2012. Even when we look at just married couples with two children—a type of family that tends to have higher incomes—median income was virtually frozen between 2000 and 2012.

At the same time, this type of family also faced a severe middle-class squeeze as the costs of key elements of security rose dramatically, including child care costs—which grew by 37 percent—and health care costs—both employee premiums and out-of-pocket costs—which grew by 85 percent.

In fact, investing in the basic pillars of middle-class security—child care, housing, and health care, as well as setting aside modest savings for retirement and college—cost an alarming $10,600 more in 2012 than it did in 2000.

Put another way, in 12 years, this household’s income was stagnant—rising by less than 1 percent—while basic pillars of middle-class security rose by more than 30 percent. As the cost of basic elements of middle-class security rose, the money available for everything else—from groceries to clothing to emergency savings—fell by $5,500. And while for the purposes of this example we have assumed this household kept retirement savings constant, data about worryingly low savings confirm that for millions of families, their retirement funds are bearing much of the pain of the squeeze.

The data paint a clear picture: The middle class is being squeezed. So it should come as no surprise that in a 2014 Pew Research Center survey, 57 percent of Americans responded that they think their incomes are falling behind the growing cost of living, up from 47 percent in 2006. In fact, the percentage of Americans who identify themselves as middle class has fallen to 44 percent, down from 53 percent in 2008.

Policies to alleviate the squeeze

Understanding that middle-class families are clearly squeezed—with adverse effects on our entire economy—we must craft policies to alleviate the squeeze. This requires two things: growing incomes and containing costs.

Jobs

Given that the majority of middle-class families derive their incomes from jobs—as opposed to investments—improving our lackluster jobs picture is the first task to address the middle-class squeeze. To do this, we need to invest in a dynamic economy powered by skilled workers who operate in an environment that lets them and their businesses compete at home and abroad. Doing so will require myriad policies outlined in depth in CAP’s long-term growth strategy, 300 Million Engines of Growth: A Middle-Out Plan for Jobs, Business, and a Growing Economy. Five areas that would directly help the jobs and income pictures in the shorter term include policies to:

Boost aggregate demand, including through extending federal unemployment insurance; raising the federal minimum wage to $10.10 per hour; strengthening the Earned Income Tax Credit by expanding it for workers without children and lowering the eligibility age from 25 to 21; and making long-term investments in our economic growth that will also pay dividends now in the form of expanding high-quality early childhood education and infrastructure

Foster inclusive capitalism that will see more gains shared with workers, including through expanding tax incentives that transfer ownership or at least a share of profits from capital ownership to employees; offering grants to regional inclusive capitalism centers; stopping policies that inhibit the growth of sharing programs; and promoting existing best practices through an Office of Inclusive Capitalism

Ensure basic workplace protections to maximize workforce participation, including through developing a federal paid family and medical leave program to ensure working families have access to wage replacement when they need it most, via the Family and Medical Insurance Leave Act, or the FAMILY Act, as well as establishing a national paid sick days standard via the Healthy Families Act

Strengthen unions, including by modernizing the union election process; ensuring that all workers, regardless of their occupation or location, have the right to join a union if they so desire; better protecting workers who choose to unionize by making the right to join a union a civil right; and establishing more meaningful penalties and remedies for workers who are fired or discriminated against for exercising their right to organize

Improve education and workforce-development programs, including a dramatic expansion of apprenticeship programs in high-growth sectors, by creating a $1,000 federal tax credit for each apprentice hired; establishing competitive grants to support promising apprenticeship partnerships in new high-wage, high-growth occupations; improving apprenticeship marketing to businesses; leveraging the federal workforce and federal contracting to support apprenticeships; and improving the portability of apprenticeships by offering grants for employers to come together to write national guideline standards for apprenticeships in key high-growth occupations

Early childhood programs

High-quality early childhood programs—including both child care and preschool programs—are critical for workers with young children who hope to remain in the workforce. Research shows that these programs are also critical educational investments in the children themselves. So with two generations relying on the existence and affordability of high-quality programs, it is critical to address the high cost of child care, which rose dramatically from 2000 to 2012. To do so, we recommend policies that would:

Provide high-quality preschool to all 3- and 4-year-olds through a partnership between the federal and state governments

Expand and reform the child care subsidy system, which is currently insufficient to reach even a majority of low-income working parents, let alone those struggling to stay in the middle class, by both providing additional resources to help families access high-quality child care and ensuring that child care assistance declines gradually as parents earn more money, rather than cutting off abruptly

Reform the Child and Dependent Care Tax Credit by making it refundable and raising the amount that can be claimed to cover more of the actual cost of child care

Expand Early Head Start-Child Care Partnerships building on the initial investment already made and reaching additional children

Higher education

Increases in higher-education costs are a huge part of the middle-class squeeze. These costs affect what parents can do to help their children pay for college and what students can bear in terms of debt as they enter an uncertain job market. What’s more, the real and perceived costs of higher-education affect who applies for and who goes to college—representing a real constraint on economic mobility, which carries a cost for individuals and for the economy. To help alleviate the middle-class squeeze in higher education, we propose policies that would:

Promote consumer choice by establishing a student-record system that can be used to create improved consumer-choice tools that highlight outcomes such as graduation rates and labor-market outcomes, and by creating a federal accountability system with institutions placed in broad categories, rather than rankings, which indicate their performance across key metrics

Restore public investment in higher education, including through increasing funding for the Pell Grant program to help low- and lower-middle-income students; creating a competitive federal grant program to support public institutions—matched with state funds—to support state policies that promote on-time completion and that significantly lower the cost of postsecondary education

Innovate to bring down costs and improve quality through increasing support for the First in the World Fund; using experimental site authority to give institutions flexibility from existing federal requirements in exchange for a commitment to implement innovative programs that reduce costs for students; creating an alternative to accreditation where institutions could choose to focus exclusively on improving the learning outcomes of their students; and increasing investment in research and development.

Health care

Access to affordable health care is critical for all American households, and the rising costs of health care in recent decades have kept a basic underpinning of middle-class security out of reach for too many. While the Affordable Care Act, or ACA, has already made a difference for millions of Americans—from the ability of children under age 26 to remain on their parents’ health insurance plans to a prohibition on exclusion from coverage based on pre-existing conditions—more needs to be done to bend the cost curve and to ensure that people have access to high-quality coverage. A single health event should not wipe out a person’s savings. To help lower costs, we therefore propose policies to:

Accelerate the use of alternatives to fee-for-service payment to reduce costs and improve care coordination, with Medicare leading the way by encouraging private payers to participate in alternative payment methods, especially bundled payments

Leverage insurance exchanges to improve access to lower-cost, high-quality insurance products, including through state marketplace officials using their broad authority to exclude low-value plans and reward plans that offer more value to consumers

Increase transparency to allow consumers to choose high-quality, lower-cost providers and services via the Department of Health Human Services, ensuring that the ACA’s requirement to provide cost-sharing information is implemented in a consumer-friendly way. Congress should also modify the ACA’s cost-sharing disclosure requirements so that the plan’s quoted costs for episodes of care are guaranteed

Reform restrictive state scope-of-practice laws to maximize use of nonphysician providers, with the federal government providing bonus payments to states that meet scope-of-practice standards delineated by the Institute of Medicine

Address cost shifting to employees by encouraging employers to share health care savings with employees via more transparency, with employers providing annual notices about how much the employer expects to pay, on average, for health care benefits per employee, as well as how much the employer expects the employee will spend, on average, for health care during the upcoming year

Housing

Having an affordable place to call home is out of reach for far too many families, putting the most basic piece of middle-class security in doubt. New mortgages are at their lowest level in 17 years, millions of Americans still owe more than their homes are worth, and half of all renters spend more than 30 percent of their income on housing. The federal government has a huge role to play in steering the country out of the housing crisis and building a stronger and more equitable housing-finance system. To do so, we suggest policies that would:

Require Fannie Mae and Freddie Mac to support a healthier and more equitable housing market by increasing access to and affordability of mortgages, providing struggling borrowers with better loan modifications that include principal reductions, and capitalizing the National Housing Trust Fund and Capital Magnet Fund

Reform the housing-finance system to realign incentives, enable broader access to affordable and sustainable mortgages, and support the creation of more affordable rental housing

Retirement

Among the top concerns of middle-class Americans is whether they will be able to afford to retire. Unfortunately for many, saving for retirement has become much more difficult in recent decades as families have struggled to find money to save and as the workplace-retirement-plan environment has fundamentally changed. As incomes have stagnated and as employers have shifted away from pensions to 401(k)-style plans, employees have been forced to shoulder far more risk and to invest what little they can set aside in savings vehicles that are often designed to take advantage of their lack of investment experience. With approximately half of all American households in danger of having insufficient savings for retirement, we propose policies that would:

Encourage the adoption of hybrid retirement plans such as CAP’s Safe, Accessible, Flexible, and Efficient, or SAFE, Retirement Plan at both the state and national levels

Increase access to existing alternative savings options such as the low-cost Thrift Savings Plan which—by allowing all workers the ability to join—would not only give many a chance to save through a workplace plan but also would provide them with access to one of the best 401(k) plans available

Require 401(k) and IRA plans to be more transparent about fees and investment practices through the adoption of a retirement label on all qualified plan options that informs consumers about the high risks of fees and lets them know how the fees in a given plan compare with fees in other plans of the same type

Make tax incentives for saving simpler and fairer by replacing the complex web of tax deductions that disproportionately benefit the wealthy with a Universal Savings Credit that would turn all existing deductions into a single, streamlined credit, as well as by potentially introducing a progressive match for low-income savers’ contributions

Conclusion

To have a strong and growing economy, we need a strong and growing middle class. The longer the middle-class squeeze continues unabated, the more these trends will continue to affect both families across the country and our economic prospects as a nation.

We know what policies would help reverse the middle-class squeeze. Now, we just need to act.

The Census Bureau reported this week that the gender wage gap between full-time, year-round working men and women in 2013 remained virtually unchanged, with women earning 78 percent of what men earn. The 1 percent increase from 2012 is not statistically significant, and there has been no real movement in the gender wage gap since 2007. While working women have made great strides since 1967, when they earned only 58 percent of what men earned for full-time, year-round work, there is still a long way to go before true pay equity is achieved.

This means that, although women are the primary, sole, or co-breadwinners in nearly two-thirds of families, dollar for dollar they continue to earn, on average, 22 percent less than their male counterparts, with Latinas and African American women experiencing the sharpest pay disparities compared to white men. There are a number of factors that contribute to the pay gap, including where women work, differences in hours worked, and education differences. But there is also a portion of the pay gap that is unexplained; researchers have estimated that as much as 10 percent to 40 percent of the gender wage gap cannot be explained even when taking into account gendered differences between the occupations, educations, and work histories of men and women.

Closing the gap will require multifaceted solutions that together help ensure that the work women perform is valued fairly, that women are not penalized unfairly for their caregiving responsibilities, and that there is greater transparency in workplace pay practices. Here are seven steps we can take that could make a difference.

1. Raise the minimum wage

Women make up a disproportionate share of low-wage workers, and estimates show that differences between women’s and men’s occupations could account for nearly one-half of the gender wage gap. Raising the minimum wage will help hardworking women better support their families. While nearly two-thirds of mothers are breadwinners or co-breadwinners for their families, women made up approximately two-thirds of all minimum-wage workers in 2012. The current federal minimum wage is $7.25 per hour, which means someone working full time, year round earns only $15,080 a year. That is below the poverty threshold for any family with children and not far above the poverty line for a single person. Increasing the federal minimum wage to $10.10 an hour would boost wages for about 15 million women and help close the gender wage gap.

2. Raise the tipped minimum wage

The gender wage gap is particularly prominent among tipped workers. The federal tipped minimum wage, which hasn’t been changed since 1991, only pays workers $2.13 per hour. According to the Economic Policy Institute, women make up two-thirds of tipped workers and are 70 percent of food servers and bartenders, occupations that comprise more than half of the tipped workforce. Tipped workers have a higher poverty rate than non-tipped workers, and 46 percent rely on government assistance to make ends meet.

As the burden of tipped-wage poverty falls primarily on women and their families, raising the tipped minimum wage could make a real difference in decreasing the gender pay gap. Recent proposals advocate raising the tipped minimum wage to 70 percent of the minimum wage to ensure that the majority of a worker’s income is coming from his or her employer, instead of from tips.

3. Support fair scheduling practices

Women, especially women of color, are more likely to work in low-wage jobs and often have rigid, unpredictable schedules that can change with little notice, making it difficult for working parents—especially mothers—to anticipate their schedules and arrange for child care. These workers risk losing their job because they lack the flexibility to alter their schedules when they need to take their child to the dentist or pick up a sick child from school—tasks that are more likely to fall to mothers than fathers. Legislation has been passed in Vermont and San Francisco in the past year that provides workers with a “right to request,” allowing them to ask for greater flexibility or scheduling predictability from their employer without jeopardizing their job. Being able to keep a job is essential to closing the gender pay gap.

4. Support pay transparency

When women are not able to discuss their salaries with their colleagues, they often cannot tell when they are making less than their male colleagues for doing the same job. The Paycheck Fairness Act would reduce pay secrecy, give women better tools to address pay discrimination, and make it more difficult for companies to pay male workers more than female workers—an important tool in combatting the gender wage gap.

Each day, 11 million children spend time in the care of someone other than a parent. Among children under age 6, 65 percent either live with only a single parent who works or two parents who both work. For parents of young children, particularly those who are low-income, the lack of affordable, high-quality early childhood programs can prevent working parents from ensuring that their families are cared for while they fulfill the demands of their jobs and can inhibit their long-term success. Furthermore, child care costed more than median rent in every state in 2012, yet access to reliable child care is a requirement for working parents to maintain employment.

Legislation such as the proposed Strong Start for America’s Children Act invests in high-quality and sustainable early learning environments for young children, working families, and the future of our country. Investing in affordable, high-quality child care creates long-lasting structures that support both working parents and children, increasing women’s ability to keep a job, excel in the workforce, and lower the gender wage gap.

6. Pass paid sick days legislation

Everyone gets sick, but not everyone has time to get better. Almost 40 million U.S. workers, or about 40 percent of the private-sector workforce, do not have access to any paid sick days. For part-time workers, that figure climbs to 73 percent. As a result, these employees often must go to work sick, send their sick children to school, or leave their sick children at home alone because they fear they will be reprimanded or fired for missing work. A 2012 poll found that one-third of parents of young children report that they will experience negative job consequences if they have to miss work to stay home with a sick child. Paid sick days would help close the gender wage gap by ensuring that women, who most often care for sick family members, would not lose pay or their jobs just because they or their child fell ill.

If employees must take unpaid leave from work when they fall ill, the loss of wages can take a toll. The strain is most acutely felt by low-income workers, most of whom are women; these workers are also the least likely group to have access to paid sick days. Eleven cities and two states across the country have recognized that this is bad for workers, bad for business, and bad for public health and have thus taken the lead in pushing legislation to guarantee paid sick days for workers through active campaigns and bills at the state and municipal levels. One such bill, the Healthy Families Act, would create a national standard by allowing workers to earn sick leave regardless of where they live.

7. Pass a national paid family and medical leave insurance program

Because caregiving responsibilities most often fall to women and mothers, women are more likely to have to leave the paid labor force to provide family care. Furthermore, working women can be targeted for discrimination and denied job opportunities altogether because of negative stereotypes about their caregiving roles—stereotypes that men are less likely to face. According to estimates, slightly more than 10 percent of the gender wage gap is due to women spending less time in the labor force than men, often stemming from these disproportionate family care responsibilities. Access to paid leave has been proven to shorten time away from work and facilitate re-entry into the workforce and makes it more likely that women will return to work, return to their previous employer, and return with the same or higher wages, all of which can help to close the wage gap. And when gender-neutral paid family leave is offered, men are more likely to take it, which reduces stigma and caregiving penalties for workers.

A national paid family and medical leave insurance program would provide wage replacement to working women—and men—when they must take time off to care for their families, bolstering families’ economic security. Paid leave would help reduce the gaps in work histories, which women are more likely to experience, that contribute to the wage gap and affect women’s opportunities to rise through the ranks. The United States is the only developed country that does not guarantee workers paid maternity leave after the birth or adoption of a child. In fact, only 12 percent of U.S. workers have access to paid family leave through their employers. California, New Jersey, and Rhode Island have implemented state-level paid family leave programs, and a national system such as that proposed in the Family and Medical Insurance Leave Act, or FAMILY Act, would help decrease the impact of the gender wage gap by supporting the vital work of caregivers and reinforcing families’ economic security.

The seven actions outlined here offer concrete opportunities to reduce the gender wage gap in the United States. Together, they can help further the cultural and structural change that will bring us closer to making the 22 percent wage gap a thing of the past.

Sarah Jane Glynn is the Associate Director for Women’s Economic Policy at the Center for American Progress. Milia Fisher is a Research Assistant with the Women’s Initiative at the Center. Emily Baxter is a Research Assistant for the Economic Policy team at the Center.

People pass a military jet while attending a job fair for veterans at the Intrepid Sea, Air, and Space Museum in New York City.

When veterans leave the service and reenter the civilian workforce, they are coming from a job that required significant training and tremendous responsibility. As new employees, this wealth of experience and unique set of skills theoretically should allow them to add value and increase productivity for an employer at a rate far faster than their nonveteran counterparts. Unfortunately, veterans’ unemployment, particularly for those under the age of 35, remains stubbornly high. In 2013, the average unemployment rate for veterans between the ages of 25 to 34, who joined the military after September 11, 2001, was 9.5 percent, around 2.2 percentage points higher than their nonveteran counterparts. Moreover, as of August 2014, nearly 15 percent of young veterans ages 20 to 24 were unemployed—a rate 4.2 percentage points higher than their nonveteran counterparts. Given their meaningful labor-market experience, why aren’t veterans, and younger veterans in particular, performing better in the labor market?

Certainly, one reason is the challenge of translating military experience and talents into credentials that employers can easily discern. According to a 2012 survey by the Center for a New American Security, or CNAS, more than 60 percent of employers said they had difficulty interpreting veterans’ skills. As CNAS notes, employers without a military background found it difficult to understand the experiences and skill sets of veterans and determine how military skills matched their business needs. In addition to issues of skill translation, the study also examined additional reasons for veteran unemployment, including negative stereotypes associated with returning veterans, skills mismatches where veterans simply do not have the skills for civilian positions in question, concerns about future deployments, and difficulty finding veterans to employ. According to the U.S. Government Accountability Office, or GAO, more than 1 million service members are expected to leave the active military over the next five years and enter the workforce, a number that may only increase depending on the size of the post-war drawdowns. Now is the time to deliver a stronger and more effective workforce system for our veterans.

One way to better the veteran-to-civilian-employee transition is through the improved access and use of labor-market information, or LMI. Over the past five years, the Obama administration has made great strides in opening data to the public, improving the functionality of that data, and ultimately, using data to spur innovation, savings, and reforms. We have seen the birth of an ecosystem of public and private app developers building better services powered by open data, especially in the health care and clean energy markets. In addition to these efforts, this summer, Vice President Joe Biden released a landmark report on job training that highlighted new tools, initiatives, and leaders in workforce development. At the same time, Congress passed the Workforce Innovation and Opportunity Act, or WIOA, with a specific focus on LMI. Building on this momentum, this report lays out five policies for better utilizing data to accelerate veteran employment in jobs that best leverage their skills.

Increase public access to more government data sets. These data sets can help local workforce planners better identify the skills of unemployed veterans and match those skills with veteran-friendly employers and local industry demand.

Launch a “JobsData.gov” platform. We recommend extending the Data.gov platform, a central depository for government data sets. The federal government should create a data community focused solely on labor-market information. As proposed, the JobsData.gov portal would focus in particular on veterans’ data and allow for easy interoperability with state data sets as well as easy access for third-party web and app developers.

Modernize O*NET. The federal government needs to improve how data is collected for the Occupational Information Network, or O*NET, the current primary database for information on occupations, skills, and related variables. Reforming data-collection techniques will ensure that information on various occupations in the United States is always relevant, correct, and updated in real time.

Convene the private sector to standardize skills data. Federal agencies should establish a more uniform standard for presenting online job postings and resumes so that the skills associated with each are more clearly distinguishable and machine readable.

Accelerate learning pathways. Increase access to new competency-based learning models, which will allow veterans to quickly identify and master the additional competencies they may need for civilian employment and, more importantly, build on the skills they already have. Such action undertaken by the federal government would accelerate the time it takes for veterans to find employment, take into account the skills they already have, and ultimately reduce some of the existing barriers to employment.

When re-entering the civilian workforce, veterans need employment opportunities where they can quickly put their skills, training, and experience to use and be highly productive from day one. As President Barack Obama said in an August 2014 speech to the American Legion National Convention, “if you’re a medic in a warzone, you shouldn’t have to go take nursing 101 to work in a hospital here in the United States.” The above recommendations, which are detailed below, are steps that policymakers, entrepreneurs, and various workforce stakeholders can take to better understand the skill profile of unemployed veterans in their community, match their skills with high-growth jobs that offer a ladder to higher wages, and ultimately decrease the period between unemployment and full productivity for those who have served us so courageously.

Aneesh Chopra is a Senior Fellow at the Center for American Progress and the executive vice president, co-founder, and a shareholder at Hunch Analytics. Ethan Gurwitz is a Research Assistant with the Economic Policy team at the Center.

]]>What the New Census Data Show About the Continuing Struggles of the Middle Classhttps://www.americanprogress.org/issues/economy/news/2014/09/16/97203/what-the-new-census-data-show-about-the-continuing-struggles-of-the-middle-class/
Tue, 16 Sep 2014 18:05:31 +0000Keith Miller and David Madlandhttp://www.americanprogress.org/issues/default/news/2014/09/16/97203//

SOURCE: AP/Paul Sancya

Steve Hawkins checks on a furnace at Dokka Fasteners training program in Auburn Hills, Michigan.

This column contains a correction.

New Census Bureau data released today illustrate once again the extent to which America’s middle class is struggling to recover from both the Great Recession and the decades of unequal economic growth that preceded it. Household incomes remained essentially flat in 2013—far below their pre-recession levels—and the share of the national economic pie that goes to the middle class continued to stagnate close to record lows. At the same time, those at the very top claimed the majority of the income growth seen since the recession’s end.

The clearest indicator of the continuing struggles of the middle class has been the failure of the national median income to rebound to pre-recession levels and its overall decline over the past 14 years. In 2013, the typical middle-class household earned an income of $51,939, which was a statistically insignificant $181* above their inflation-adjusted 2012 income level but still nearly $4,500 below what they earned before the start of the Great Recession in 2007. Of greater concern, however, is that middle-class incomes have been either stagnant or declining since peaking in 1999. As a result, the median household in the United States is now actually earning less than it did in 1989—nearly a quarter of a century ago.

The fact that the majority of the income gains seen since the Great Recession ended in 2009 have been concentrated at the very top is partially responsible for the median income’s stalled recovery. While families across the entirety of the income distribution suffered greatly during the recession, the wealthiest households have bounced back the fastest. Between 2010 and 2013, the average income of households in the top 5 percent increased more than 5 percent, while average incomes of those in the middle 60 percent actually declined overall. Such disproportionate growth only further exacerbates economic inequality as the middle class fall further and further behind the rich.

This concentration of post-recession income growth among the wealthiest households should come as no surprise given that those at the top of the income distribution have seen their share of the national economic pie expand for decades at the expense of the middle class. In 2013, the middle 60 percent of households took home only 45.8 percent of total national income—essentially unchanged from the record-low 45.7 percent they took home in 2011 and 2012 and down 7.4 percentage points from the record-high share they took home in 1968. To put this figure in perspective, 7.4 percent of the aggregate national income in 2013 was approximately $661 billion dollars, or $9,000 per middle-class household. Over that same time period, the top 20 percent of households expanded their share of total national income from 42.6 percent to 51.0 percent, with the top 5 percent of households alone increasing from 16.3 percent to 22.2 percent.

The United States requires a prosperous middle class to spur economic growth. But as the Census Bureau data released today make clear, America’s middle class is still struggling to reverse the trends of the past several decades and overcome the economic trauma of the Great Recession. Policymakers must take action to help the middle class by enacting policies that help more Americans get back to work and ensure that those who do have jobs can earn enough to support themselves and their families. Without such action, America’s middle class will continue to be squeezed more and more, sacrificing both their well-being and overall U.S. economic growth.

Keith Miller is a Research Associate with the Economic Policy team at the Center. David Madland is the Managing Director of the Economic Policy team at the Center for American Progress.

*Correction, September 16, 2014: This article has been updated to clarify that the change in household income in 2013 was not statistically significant.

]]>The Top 3 Things You Need to Know About the 2013 Poverty and Income Datahttps://www.americanprogress.org/issues/poverty/news/2014/09/16/97154/the-top-3-things-you-need-to-know-about-the-2013-poverty-and-income-data/
Tue, 16 Sep 2014 16:50:08 +0000Melissa Boteach and Shawn Fremstadhttp://www.americanprogress.org/issues/default/news/2014/09/16/97154//

SOURCE: AP/Tamir Kalifa

Maggie Barcellano, who lives with her father, enrolled in the Supplemental Nutrition Assistance Program to help save for paramedic training while she raises her three-year-old daughter.

New data released today by the U.S. Census Bureau show that four years into the economic recovery, there has been some progress in the poverty rate as it fell from 15 percent in 2012 to 14.5 percent in 2013, with gains especially strong for children, whose poverty rates fell by nearly 2 percentage points. There was no statistically significant improvement, however, in the number of Americans living in poverty. The share of families struggling on the economic brink also remains elevated, with about one-third—33.9 percent—of Americans just one paycheck, sick child, or broken-down car away from poverty. Women, people of color, and young workers are among those hardest hit by the recession and the subsequent weak recovery.

These data further confirm what many working families experience on a daily basis: The economy is off kilter, with gains from economic growth concentrated at the top, while low- and middle-income families continue to struggle with stagnant incomes and barriers to employment.

Unfortunately, these trends are not unique to this particular economic recovery. In the six years between the end of the 2001 recession and the beginning of the Great Recession, low- and middle-income families experienced few gains from economic growth. In fact, the incomes of low- and moderate-income families were actually lower in 2007 than in 2000, and after hitting its lowest point in several decades, the poverty rate increased from 11.3 percent in 2000 to 12.5 percent in 2007. These negative trends occurred despite the fact that the unemployment rate was only moderately higher in 2007, at 4.6 percent, than it was in 2000, at 4 percent, with declining and stagnant wages being a key culprit.

In this context, here are three things you need to know about the new data for 2013 and how they affect looming policy choices:

The economic recovery is not translating into broader income growth, keeping millions of families trapped in economic insecurity.

Young workers are still struggling to stay afloat, despite being more educated than previous generations.

Fifty years after the Civil Rights Act, there has been some progress for women and people of color, but persistent racial, ethnic, and gender disparities remain.

These trends and their implications are examined below.

The economic recovery is not translating into broader income growth

Adjusting for inflation, median family income stayed flat between 2012 and 2013 and remained lower than in both 2007 and 2000. This decline in family incomes is due in large part to stagnant wage trends.

Given that the vast majority of Americans—including those at the bottom of the income scale—rely on their paychecks and work-related benefits as their primary source of income, wage stagnation is an important variable linked to the lack of progress on improving economic security and cutting poverty. As economists at the Economic Policy Institute have recently documented, real wage growth has been negative since 2000 for workers in the bottom 30 percent of the wage distribution and basically stagnant for workers in the middle. Only workers with incomes in the top 5 percent have seen solid gains.

Flat wages mean that low- and middle-income families often must borrow to keep pace with the rising costs of basic goods and to afford pillars of family economic security such as child care and health care. This leaves families more vulnerable to economic shocks, which can send them spiraling below the poverty line once again. Income inequality is a destabilizing force in our economy, leaving large swaths of people subject to chronic economic insecurity and debt.

Moreover, as Figure 1a shows, increasing income inequality has exacerbated the increase in wealth inequality, with families in the bottom 40 percent of the income distribution experiencing particularly large declines in net wealth between 2001 and 2013.

Absent policy action, these trends are likely to continue. In August 2014, low-wage industries, such as food services, retail, long-term care, home health care, and temporary help, comprised 37 percent of new jobs in the private sector. Fortunately, there is evidence that establishing and strengthening basic labor standards is part of the solution. A recent Economic Policy Institute analysis showed that during the past year, real hourly wages declined for all workers except those in the bottom 10 percent of the wage distribution, with workers in states that raised their minimum wages accounting for the increase. This underscores that public policy—and specifically minimum-wage increases—have an important role to play in combating wage stagnation.

As the economy slowly recovers, improving job quality and boosting wages must be a central strategy to ensure that the gains of economic growth reach struggling families.

Young workers are still struggling to stay afloat, despite being more educated

While children experienced significant declines in their poverty rates in 2013, these gains were less dramatic for youth transitioning to adulthood. According to the new Census data, 19.4 percent of people ages 18 to 24 had incomes below the poverty level last year, and young adults ages 25 to 34 did not see an improvement in their poverty rates, which were stuck at 15.8 percent in 2013. High poverty for these groups is particularly striking given their education levels. Young people today are much more educated than their counterparts 50 years ago. However, 18- to 34-years-olds today face higher poverty rates than those of the same ages and educational levels did 50 years ago. Figure 2a charts poverty trends for 25- to 34-year-olds by education level between 1968 and 2013. It shows, for example, that even poverty rates for young people with college degrees or more were about twice as high in 2013 than in 1968.

While some of this increase is due to continued high unemployment, there has also been a clear long-term trend toward higher poverty rates for young people at all levels of education. One of the consequences—shown in Figure 2b—is that the vast majority of young people living in poverty today have a high school diploma or more, and more than one-third have some postsecondary education, including 14.5 percent with a bachelor’s degree or higher.

Higher education is still an important platform, making it possible for millions of Americans to join the middle class. As Figure 2a shows, the more education one has, the less likely he or she is to be poor, with workers who have at least a four-year college degree experiencing the lowest rates of poverty. However, without good jobs and good wages, the return that today’s young people see on their educational investment will continue to decline. Even more students will be saddled with outsized student-loan debts that will keep them from investing in home ownership, starting families, and affording basic necessities.

The high poverty rates of young people carry long-term consequences. Research that examined the prospects of college graduates who started their careers during recessions revealed that they were followed by lower wages over the roughly 15-year period data was available.

Improving the mobility and opportunities of young workers will require improving job quality. This can be done by raising the federal minimum wage to $10.10 per hour, adjusting it annually to keep pace with the costs of living, and enabling young workers without qualifying children to access the Earned Income Tax Credit, or EITC. Providing more avenues for young people to access employment, such as through expanding apprenticeships, and addressing their crushing levels of student debt through refinancing options can also help address high poverty rates among young people.

Despite some progress for women and people of color, persistent disparities remain 50 years after the Civil Rights Act

The poverty rate is too high across the board, but certain groups continue to face much higher risks of poverty and economic insecurity than others, including women and people of color.

Fifty years after the passage of the Civil Rights Act, it is important to acknowledge the progress that has been made in cutting poverty, particularly for African Americans. From 1966 to 2013, the share of the private-sector workforce comprised of people of color rose from 11.2 percent to 29.7 percent, and women’s share grew from 31.2 percent to 48.2 percent. As Figure 3 shows, black poverty rates fell from 55 percent in 1959 to 27.2 percent in 2013, due partly to greater civil rights protections and opportunities in the labor market. And Latinos were the only racial or ethnic group to see a statistically significant decline in their poverty rate in 2013.

That being said, Latinos, African Americans, and Native Americans are still significantly more likely to live below the poverty line than white non-Latinos. People of color are more likely to live in neighborhoods and places with very high poverty rates, often for reasons related to systemic discrimination; to face employment discrimination; and to bear the brunt of policies that have led to mass incarceration. As with young people, their poverty rates remain relatively high despite considerable educational advancement. For example, based on our analysis of CPS data, in 1965, only one-third of working-age African Americans had a high school diploma or additional education; today, nearly 90 percent do. In short, plenty of work still needs to be done to ensure equal opportunity.

The story is more mixed for women. As Figure 3b shows, while elderly women’s poverty rates dropped from 32 percent in 1966 to 11.6 percent in 2013—a testament to Social Security and other federal policies’ effectiveness—the poverty rate for non-elderly women remains elevated. While the poverty gap between non-elderly men and women has narrowed some over time, this has more to do with the deteriorating economic positions of many men than with improvements for women.

These data do not take into account how the EITC, the Supplemental Nutrition Assistance Program, or SNAP, and certain other important elements of the safety net have improved the economic well-being of families, but they do provide a point of comparison in terms of income from work and cash benefits.

For women, basic labor standards and the workplace environment have not caught up to the reality of their central role in the labor market. The United States is the only developed country with no paid family and medical leave and no paid sick days, which forces workers to make impossible choices between work and family responsibilities. The lack of these family-friendly policies is an important factor of the persistent gender wage gap.

However, these disparities are not just problematic for women and people of color. They also affect our overall economy. By 2042, people of color will make up the majority of our workforce. Allowing racial and ethnic disparities to linger now will undercut our economic competitiveness in the future. Similarly, if we close the gender wage gap, we can cut the poverty rate of working women and their families in half and add nearly 500 billion dollars to our gross domestic product.

A recruiter meets with employment seekers during a job fair in Philadelphia, June 2014.

Since the end of the Great Recession, the economy has added 8.1 million jobs, and the unemployment rate has fallen from 10 percent to 6.2 percent. The labor market is much healthier today than at any point since the Great Recession, but beneath the top-line numbers, it still has a long way to go before it returns to historically healthy conditions. Since March, the Federal Reserve has tacitly acknowledged the widening gap between the reality of the labor market and its most well-known measures by switching from a quantitative unemployment threshold to more comprehensive “measures of the labor market” in its forward guidance. The question, then, is this: What is happening with these broader labor-market indicators the Federal Reserve is looking at? Here’s a quick tour of the most important jobs data you should see in the headlines but rarely do.

Who’s working, who isn’t, and why

When the economy is doing well, more people typically enter the labor market because there are more jobs available. So we should expect the labor-force participation rate to be increasing in the aftermath of the recession. It hasn’t been. Instead, it’s declined steadily since the end of the recession and is as low today as it was in the late 1970s, when women were entering the workforce for the first time. Even with the positive developments we have seen in 2014, labor-force participation is still stuck where it was at the end of 2013.

One explanation for the decline in labor-force participation is that as Baby Boomers age, more Americans are in retirement. The fact that we see the same postrecession trend among 25- to 54-year-olds, people in their prime working years, makes this theory hard to support.

Underemployed and uncounted job hunters

Policymakers and pundits have taken far too much comfort in the decline in the headline unemployment rate. The extent to which unemployment has dropped depends on how it’s measured, especially in this recovery. The typical measure, called U-3 by economists, is pretty restrictive: It counts the percentage of people who are actively looking for work but cannot find it. There are other, broader measures we can look at. Perhaps the most complete picture, called U-6, includes marginally attached workers—those who have looked for work recently but are not looking currently—and those working part time who would prefer full-time work. U-6 is always higher than U-3, but it has gotten a lot higher since the recession, and the gap has been essentially unchanged since January.

Long-term unemployment

Another reason that the traditional unemployment rate is less informative about the overall health of the labor market is the fact that today the number of long-term unemployed, while down sharply from its postrecession peak, is still almost 50 percent higher than its highest prerecession level on record. There are still 3.2 million Americans who have been unemployed for half a year or longer and are still actively searching for work. Thirty-three percent of all unemployed fall into this long-term unemployed category. The average length of time someone has spent unemployed is about seven-and-a-half months, almost double what it was before the recession.

Weak job growth

As for job growth, during the economic expansion of the 1990s, the economy added at least 250,000 jobs per month 47 times. During the current expansion, which has now lasted roughly half as long, we have seen only six months of job growth greater than 250,000, which includes abnormal hiring involved with conducting the decennial census. Meanwhile, at the average rate of job growth over the past three years, The Hamilton Project estimates that we will not reach our former level of employment, when factoring in new labor-force entrants, until mid-2019.*

Insecure labor force

Another approach is to think about what data we would expect to see if the labor market were healthy and look for that data—or the absence of that data. In a healthy labor market, there is a tremendous amount of churn, with roughly 2 million workers flowing in and out of jobs each month. This is crucial for the U.S. economy, as it represents workers and firms finding better, more productive matches. During times of economic uncertainty, however, people are hesitant to leave their jobs. We cannot directly measure something such as overall job fit, but we can make reasonable inferences about these things by looking at the rate at which workers quit their jobs. As you might expect from the rest of the data we have explored, quit rates are conspicuously low, yet another indicator of a still sluggish labor market.

Declining real wages mean there is still slack in labor markets

One other way of analyzing the health of the labor market is to treat it like any other market, where supply and demand determine prices—or wages, in this case. We want a labor market that is improving and adding more jobs. If the market is improving, we should see more jobs and upward pressure on the cost of labor. Is there evidence of rising real compensation? Hardly. The Employment Cost Index, a more complete measure than basic hourly wage growth, shows falling real wages since the recession. Negative real wage growth means the amount of slack in the market is still considerable.

Conclusion

We have been living with the effects of the Great Recession for nearly six years, and the unemployment rate has never told a story of the labor market as incomplete as it does today. When policymakers talk about the need to let off the gas pedal and start tightening policy, which Congress has been proudly doing since 2010, they are consciously or unconsciously taking a myopic view of the labor market’s recovery and causing permanent damage to the economy.

Complacency among policymakers has become increasingly entrenched as the recovery lumbers on. Recent data do show that we are headed in the right direction but not nearly fast enough, and we certainly have not arrived at our destination. People usually assume that restraint and caution is safer, but there are situations in which this instinct makes one much less safe. During recovery from a deep recession, speed is safety. If we do not aggressively reintroduce the workers who have left the labor force and reduce the number of long-term unemployed, not only would it be an injustice to them, but it would also be a huge, permanent shrinking of the American economy as a whole.